Trade Talk Tension Dips Sterlings
The UK PMI manufacturing index strengthened to 55.3 for August from 53.3 the previous month while the services-sector index strengthened to 60.1 from 56.5. Both figures were above consensus forecasts and the composite output index strengthened to the highest level for over six years. New business strengthened, although there were further labour-market concerns as companies cut jobs at a faster pace.
The UK currency moved lower following the latest press conference on the Brexit trade talks. EU Chief Negotiator Barnier expressed surprise and disappointment at the lack of progress and warned that talks were going backwards at some points. He again criticised the UK position and Prime Minister Johnson, again warning that a deal was needed by October at the latest, and repeated that a deal was unlikely at this stage. UK officials rejected Barnier’s criticism as tensions increased.
Narrow ranges prevail on Monday with the Sterling coming in just below 1.3100 against the Dollar and 1.0930 against the Euro.
The US flash PMI manufacturing index strengthened to 53.6 from 50.9 previously and above consensus forecasts of 51.9 whilst the services-sector index also strengthened to 54.8 from 50.0 previously. US existing home sales also strengthened to an annual rate of 5.86mn for July from a revised 4.70mn and well above consensus forecasts.
The data triggered fresh doubts as to whether the Euro-zone would be able to sustain a faster rate of recovery than the US, especially given the recent increase in coronavirus cases and warnings over complacency from German Chancellor Merkel. The Dollar maintained a firmer tone following the releases with a further underlying and the Euro dipped to lows near 1.1750 before regaining some territory.
The French PMI manufacturing index declined to 49.0 for July from 52.4 while the services-sector index dipped sharply to 51.9 from 57.3 with both figures well below consensus forecasts and the data triggered a sharp Euro dip. The German services-sector data provided an element of relief, although the services sector also registered a significant monthly setback. The Euro-zone PMI manufacturing index overall declined marginally to 51.7 from 51.8 with the services index at 50.1 from 54.7.
The Euro dropped and bottomed at 1.1750 on Friday, the lowest level since August 12 but found support and rebounded modestly to the 1.1775 area. The drop, largely due to positive US data triggered notable Euro losses which looks like continuing into this new trading week unless fresh buyers are found.
Nothing on the docket today and as of writing, the Euro currently trades just above the 1.18 against its US counterpart.